Section 84 relief and previously used assets: lease or hire of old premises and machinery defeated eligibility for a new industrial undertaking.

Section 84 relief was available only to a newly established industrial undertaking that satisfied the statutory conditions, including the bar on formation by transfer of previously used building, machinery or plant. The commentary states that "transfer" was read broadly to include lease or hire of factory premises, machinery and electrical installations previously used by another business. It also notes that the later proviso deeming rented premises not to offend the clause supports the view that, before that insertion, an undertaking set up in rented premises with previously used assets did not meet the condition. On that basis, the assessee was treated as ineligible for relief.

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Issues: Whether the assessee was entitled to relief under section 84 of the Income-tax Act, 1961, despite using factory premises, machinery and electrical installations previously used by another firm on rent and hire.

Analysis: Relief under section 84 was available only to a newly established industrial undertaking satisfying the conditions in section 84(2). The relevant condition barred an undertaking formed by the transfer to a new business of building, machinery or plant previously used for any purpose. The expression "transfer" was held to have a broad meaning in the context of the provision and to include lease or hire of building, machinery and plant. The later insertion of the proviso deeming rented premises not to contravene clause (ii) supported the conclusion that, before its insertion, a new undertaking set up in rented premises with previously used machinery did not satisfy the statutory condition. The assessee's undertaking was therefore not a case where the statutory prohibition was absent.

Conclusion: The assessee was not entitled to relief under section 84 for the assessment year 1965-66 and the answer to the referred question was against the assessee and in favour of the Revenue.

Ratio Decidendi: For section 84(2)(ii) of the Income-tax Act, 1961, lease or hire of premises, machinery or plant previously used by another business constitutes a transfer of previously used assets and defeats eligibility for relief to a newly established industrial undertaking.

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